Acquisition spree gives U.S. firm aerospace expertise and a
strong presence in Europe
By Daniel Michaels and Robert Wall
LE BOURGET, France -- One of the biggest European players at
this year's Paris Air Show isn't a European company at all. It's
General Electric Co.
Over the past decade, the U.S. industrial icon has bought a
number of aerospace companies and suppliers from Britain and Sweden
to Italy and the Czech Republic. The deals have made GE parts
ubiquitous on modern jetliners. It has grown into one of Europe's
largest aerospace employers, with roughly 11,600 workers across the
continent, setting it apart from many of its peers.
European deals are familiar turf for John Flannery, who last
week was named GE's new chief executive officer starting in August.
He made his mark at the company leading GE's biggest industrial
acquisition ever, the $17 billion purchase of France's Alstom SA
power business.
GE is now trying to turn its collection of disparate European
aerospace assets into a whole that is greater than the sum of its
parts. It wants to knit the businesses into a pan-European group
that can develop new equipment and tap European Union development
funding.
"We pick the best companies at the time wherever they are
globally," David Joyce, GE vice chairman and boss of the aviation
business said. "As long as it makes sense we buy them."
Rivals are watching with interest. Eric Schulz, president for
civil aerospace at Britain's Rolls-Royce Holdings PLC, said "GE's
size has always been and I believe will always be a threat for
Rolls-Royce and for the others, including their own customers." The
British aircraft-engine maker is GE's biggest rival in powering the
largest jetliners.
But Mr. Schulz said size has drawbacks, making companies less
flexible as they try to protect broader corporate interest and, as
a result, fail to offer the most competitive product. Being leaner
"I hope gives us more creativity and innovation," Mr. Schulz said.
Rolls also is investing, including in the U.S., he said.
GE executives in Europe say that getting employees from a
variety of companies and countries to learn the conglomerate's ways
and to cooperate can be difficult, but their engineering talent
benefits the group.
GE's recent European spree is built on deep links. In 1941, GE
built the U.S.'s first jet engine based on a British design. In
1974, it teamed up with a French rival, which was building engines
for the supersonic Concorde, and today their CFM International
joint venture is the world's biggest producer of jet engines. In
2007, GE bought U.K. airplane-electronics maker Smiths Aerospace,
expanding its aviation business beyond engines and landing
gear.
The company's massive plane-leasing business, GE Capital
Aviation Services, known as GECAS, largely operates from Ireland
and London. It has a fleet of about 1,700 planes with more than 200
customers. GECAS placed deals to buy 100 Airbus aircraft and
another 20 from Boeing on the first day of the Paris Air Show
unfolding outside the French capital this week.
When GE decided to expand into the civilian turboprop market,
long dominated by U.S. rival Pratt & Whitney, a unit of United
Technologies Corp., it bought Prague-based Walter Aircraft Engines
in 2008.
In 2013, GE snapped up Avio Aero, an important supplier near
Milan whose private-equity owner was looking to exit. The company
makes vital engines components for jets, turboprops and
helicopters.
Last year, GE acquired 3-D printing companies in Germany and
Sweden that are important suppliers to Avio, Walter and GE's engine
division in the U.S. Mr. Joyce said that when GE wanted to grow its
3-D activities, it had to strike deals in Europe because that is
where the expertise resided.
Last week, on the day GE named Mr. Flannery its new boss, it
also said it had bought OC Robotics of Bristol, England, for an
undisclosed sum. The company's snake-arm robots should make repairs
in difficult to reach places on wings easier.
GE's European empire "is something that came together almost
accidentally," said Riccardo Procacci, a GE veteran who moved to
Avio from its Italian oil-and-gas business. "Stepping back now, we
can see we are one of the biggest aviation companies in
Europe."
For GE, "a strong presence in Europe brings a different
perspective on the world," said Mr. Procacci.
Being based in Europe allows companies to sell locally developed
high-tech components like engine combustors that in the U.S. face
export restrictions due to national-security concerns, he said.
GE's newly grown European roots give it access to national
technology funding it couldn't otherwise tap. In Italy, it has
built a network of ties to universities and small business that
benefit from government support.
And the various acquisitions bring GE a new continent of
expertise it can draw from. When GE explored the best way to create
a new turboprop engines, its experts in Prague and the U.S. looked
at what other units, including Avio, could offer. "We said, this is
going to be a European engine," said Brad Mottier, a vice president
at GE Aviation.
The engine is now in development at GE locations across
Europe.
(END) Dow Jones Newswires
June 22, 2017 02:48 ET (06:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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